JP Morgan raises its rating on United Microelectronics (NYSE: UMC) from Neutral to Overweight as valuation gets attractive and the 40mm gap narrows.

JP Morgan comments, "We upgrade UMC to OW for three reasons: valuation, upbeat 2Q and 40nm progress. We expect 2Q results to beat consensus which should provide an immediate upside catalyst along with attractive valuations and narrowing 40nm gap, which should result in UMC's most viable ‘second source status' strategy coming back in play. Investors might be worried about macro issues hurting 2H demand, but we stick with our positive industry stance and believe that 3Q will still be a growth quarter followed by a seasonal 4Q."